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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: particular occupations: tronc schemes

A ‘tronc’ is an arrangement for the pooling and distribution to employees of tips, gratuities and/or service charges in the hotel and catering trade.

The person who distributes monies from the tronc is known as the troncmaster. Where a tronc exists responsibility for operating PAYE on the distribution may lie with the troncmaster rather than the employer.

If this is the case, the troncmaster will be required to

  • register for PAYE
  • obtain RTI starter checklists (or equivalent)
  • submit a Full Payment Submission (FPS) ‘on or before’ payments of tips, gratuities or service charges are made, see COG904220.

See COG904230 for guidance on situations where an employer/troncmaster does not have to report PAYE information ‘on or before’ they make payment.

Where someone other than the employer is involved in the distribution of tips etc it is essential that the full facts are established. This is because if there has been a PAYE failure it is common for

  • the employer to claim that there was a tronc and that distributions were made by the troncmaster and
  • the person involved in the distribution to claim to have acted solely at the employers command.

The caseworker should familiarise themselves with the guidance at

  • PAYE Manual - PAYE Operations - Payments for PAYE purposes - Info menu - Tips, Gratuities, Service charges and Troncs
  • NIM2900 to NIM2985
  • Chapter 2 of the CWG2 booklet, Employer’s Further Guide to PAYE and NICs
  • Booklet E24 - Tips, Gratuities, Services and Troncs.

Where PAYE has not been operated and a scheme exists for a tronc the caseworker should

  • establish the facts to decide if the troncmaster is correctly liable for PAYE
  • where appropriate, seek recovery from the troncmaster and
  • always consider whether HM Revenue & Customs should direct the employer to operate PAYE on future payments under Regulation 100
  • although unlikely, if it is established that the employer determines which employees will get payments from the tronc and how much they will get, even though the troncmaster might pay the tronc payments to the employees, the employer is liable to pay Class 1 NICs.